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Top 10 Things to Consider on Home Loans
Here are our Top 10 most important things to consider when shopping for a Home Loan, Equity Line of Credit, or Refinance, courtesy of Loans-Directory.Org:
1. Down-Payment - As a general rule of thumb, lenders will be seeking contribution from you of around 3% to 6% of the total loan value. This can be negotiable, and there are many loan packages available.
2. Fixed versus Adjustable ? The two most common loan products available for home mortgages are fixed rate versus adjustable rate.
Fixed rate means that you agree on an APR (annual percentage rate) that does not change through the life of the loan, whereas, an Adjustable Rate Mortgage, better known as an ARM, means that rates and monthly payments can change, often tied to the U.S. Government Treasury Bills or some other form of ?index?, with the frequency of change dependent upon the terms of the loan.
Deciding on which way to go involves many variables. We suggest that you start by examining the fixed rate products available on the market. They are by far the most popular, and arguably with the least amount of risk. After evaluating several preliminary loan offers (quotes) for fixed rate mortgages, you can then venture into the world of ARM?s to see if one of these products may be right for you. But, proceed with caution, and understand all the risks, alongside any potential benefits.
3. APR ? APR, better known as the annual percentage rate, aka: ?rate?, is arguably the most important consideration you must examine when looking for a loan. The APR includes principle, interest, ?points?, fees, PMI (Mortgage insurance), and other costs associated with the loan. While all costs and terms are significant and affect the bottom line, we suggest that shopping rate is a very good starting point.
4. Loan Types: There are several standard loan products to look for, including 30 year fixed, 15 year fixed, bi-weekly mortgages, 1 month ARM?s, 5 year fixed ARM?s, 2nd Fixed, ARM?s with a provision to convert after 5 years, lender buydowns, and discounted mortgages.
We think the best place to start, is to obtain quotes for a 30 year fixed rate loan, and then go from there. 30 year fixed rate loans generally produce the lowest monthly payments for fixed rate products, and they are relatively safe. Once you know where you stand with a 30 year fixed, after obtaining quotes from several lending institutions, then you can consider the possibility of exploring more exotic loan products. At this juncture, you will want to consult with those you trust, for good, solid advice and feedback on risk versus reward.
5. Loan Amount Qualification, Income: This can vary widely depending on you, your lender, and many other variables. However, as a rule of thumb, look at 2 to 2 ? times your current household income, as a baseline to determine how much you can afford to borrow.
6. Loan Amount Qualification, Expenses: This is another broad category that varies from one lending institution to the next. However, there are two general factors to look at, and they are Housing Expenses (such as mortgage, property taxes, and insurance), and long-term debt (which can include credit cards, auto loans, etc.).
First, add all your expenses together. As a rule of thumb, you will want your expenses to not exceed 33% to 36% of your gross household income.
Second, examine your housing expenses only. As a rule of thumb, you?ll want these expenses to not exceed 25% to 28% of your gross household income.
7. Employment and Credit History: Lenders generally want to take a look at your employment history so that they can see a pattern of stability and income. Lenders generally also want to take a look at your credit history, so that they can see a pattern of borrowing and repayment in your past. Lenders cannot discriminate and must use this information solely for the purpose of considering your ability to repay a loan. Also, many loan products are available for all kinds of customers, with varied financial backgrounds and histories.
8. Points: Points are one of the primary fees charged on the loan, and they represent the profit earned by the lending institution. One point represents one percent of the total loan amount, and points are usually tax-deductible (along with the interest paid on the loan). They are broken down into two basic types:
Origination Points ? Origination Points are the fees charged by the lender, and represents their gross profit.
Discount Points ? Discount Points are most often charged in association with a lowered interest rate. In other words, the Discount Points represents a dollar amount, as a fee for giving the borrower a lowered APR (lower than what the lender might otherwise charge).
9. Sub-Prime Loans: Sub-Prime Loans consist of loan products designed for customers with challenging credit and financial backgrounds, or, customers that are looking to re-establish credit. They can be significantly higher then the prime lending rate, with less favorable terms (Often times, the loans are for the short-term, such as 2 to 3 years). However, they do offer a venue for certain individuals, and they can allow customers to re-establish credit, or buy new homes prior to cleaning up a credit history, etc.
For some of you, this avenue may offer exactly what you?re looking for. It?s important to know that lenders who specialize in sub-prime loans are out there and want to earn your business. However, we advise that you proceed with caution. Be sure to gather sound advice from trusted friends and professionals, and understand all the risks versus rewards, prior to signing on the dotted line.
10. Short-Forms: The most important thing you can do as a consumer of loan products is to shop around and get several preliminary loan quotes for your consideration.
These are no risk, no obligation, preliminary loan offers. They take 30 seconds to 2 minutes to complete, they require no personal or confidential disclosure on your part, and they require no commitment from you.
We suggest that you obtain 3 or 4 offers. You can then examine and compare the terms, rate, fees, and all other pertinent information about the loan product, and the lender, at your leisure and in the comfort of your own home.
Loans-Directory.Org has categorized hundreds of online services that you can explore. You can also go to any search engine and find them from there. Look for a ?privacy policy? on their website, as well as short, simple application forms that make sense and are relatively easy and quick for you to complete.
Also, take a quick look at the current interest rate for 30 year fixed loans, as well as the 6 month trend graph. We have set up a free webpage with this information, or you can find many graphs and charts via your favorite search engine.
We?ve enjoyed providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, but never turn your back on your own common sense.
Publishers: This article may be freely distributed so long as the copyright, author?s information and an active link (where possible) are included.
Disclaimer: Disclaimer: Statements and opinions expressed in the articles, reviews and other materials herein are those of the authors. While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. The author will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
Online Mortgages in 5 Easy Steps!
Were all entitled to the opportunities and benefits of home ownership. But because most of us arent loaded with cash, we must find banks and lenders to assist us with finance. No matter what your credit history is, or what your circumstances are, the internet has now made this process a billion times easier. This article will outline a 5 point plan, to assist you in your pursuit of financing online:
Step 1: Don?t be afraid to go shopping.
Discussing personal mistakes in life can paralyze us with fear, namely, getting into the ?bad credit? issues.
The good news is that for the most part, getting into this ?stuff? is completely unnecessary in the preliminary phase of shopping for a loan, beyond the basic information provided in an online short-form.
In other words, you don?t really have to talk about the nitty-gritty details, until after a loan offer has been presented to you. We?ll get into that later?
But since we?re on the subject, if you are a consumer with credit history issues, let me briefly take this opportunity to state the obvious:
You need to first get into the right frame of mind. Don?t be afraid to ask questions, and don?t be intimidated by your credit history. Be honest. Give truthful information. But don?t feel shame or regret for your past or present personal circumstance. They make you who you are, and that earns you respect! So with that said, put on your confidence, and let?s GO!
Step 2: What?s the going rate?
Information is free, so why not be informed? Many resources are available on the internet to get current interest rates, including a rate-watch at our website:
So to start with, take a look at two pieces of information:
A little exercise: Do you see the current rate? What about the 6 month graph. Are rates going up, down, or staying about the same? Is the current rate higher than it was 6 months ago? Lower then 6 months ago?
Now don?t feel the need to analyze this information too much. Relax. For now, just look at it, and perhaps, check it several times a week to stay informed.
If you do this, you?re already 10 steps ahead of the game!
You are now an informed shopper. When an offer is presented to you in the near future, you?ll be able to ascertain how good an offer it actually is by knowing how it compares to the ?going rate?. (sidenote: Don?t forget to check terms, fees aka: ?points?, and conditions relating to your loan offer. Often times you will see higher points or less favorable terms, in exchange for a lower rate.)
In addition, you?ll be able to assess if you think rates are declining or on the rise, which may help you to decide if ?NOW? is the right time.
Step 3 ? Obtain several offers, and SHOP RATE!
When you buy a car, do you seek out the best deal? When you go grocery shopping, do you consider which store offers the best prices?
Shopping for a mortgage should not be seen any differently, and the best way to do this is to obtain several preliminary loan offers online.
Get 3 or 4 offers, and compare them. How do they compete against each-other? How do they compare to the going interest rates (see step 2 above).
Our website has compiled an index of hundreds of lenders and institutions that provide these preliminary services. This information is free, and available for you to peruse at your leisure.
Many of these companies? conduct searches of thousands of lenders, a lot of them in your local area, and they provide you with 4 loan offers almost instantly.
Take advantage of this! These are no obligation services, and for the most part, the online application forms are simple, fast, and easy. They literally can take no more then a couple minutes to complete.
In addition, you don?t need to be burdened with going through your credit history at this phase. Completing the simple form is all it takes. If you qualify, and a lender is located that wants to do business with you, then you?ll go to the next step which is to discuss this possible opportunity over the phone.
But isn?t it nice to know that by that point, the lender has basically, already approved your loan?
Step 4: A couple things to keep in mind
Step 5: Understanding your Options
Let?s put this all together.
If you?ve followed this simple plan, you will discover that there are indeed consumer loan products tailor made to meet everyone?s needs. Remember to examine the terms and rates, obtain several loan offers, and then talk to the lenders over the phone. Find out who they are, and whether or not you?d like to do business with them. Throughout this process, stay informed by checking interest rates.
We?ve enjoyed providing this information to you, and we wish you the best of luck in your pursuits. Remember to always seek out good advice from those you trust, but never turn your back on your own common sense.
Sincerely, Webmaster Tom Levine
Copyright 2004, by LoanResources.Net
This article may be freely distributed so long as the copyright, author?s information and an active link (where possible) are included.
Be Prepared With Your Home Equity Loan Checklist
A home equity loan can be an excellent way to obtain money in order to pay off high interest bills or consolidate your current debt into one monthly payment. A home equity line of credit is a form of revolving credit in which your home serves as collateral. Because the home is likely to be a consumers largest asset, many homeowners use their credit lines only for major items such as education, home improvements, or medical bills and not for day-to-day expenses. Additional benefits include a nice tax advantage and the possibility of an overall lower monthly payment. However before you decide that a home equity loan is right for you make sure you do your homework.
Not all online lenders of home equity loans are the same which means there are ample opportunities to save a few more of your hard earned dollars.
The biggest obstacle to overcome is deciding on the appropriate online loan lender. Make the wrong choice here and it could come back to haunt you in the form of higher payments. I have compiled a small list of items to check for when searching for the best online loan lender. One item to be on the look out for is the annual percentage rate or (APR) as it?s commonly known. This is the cost of credit on a yearly basis expressed as a percentage. This cost is based on the interest rate alone and will not take into effect other fees and charges such as closing costs.
Most home equity loans or lines of credit revolve around variable interest rates. In many cases lenders entice consumers with an offer to temporarily discount interest rate for home equity lines. This rate is unusually low and may last for only an introductory period, such as 6 months.
Typical information that a loan officer will ask you to provide include a checklist for Full Document loan approvals, 1 month of pay stubs from your employer, the previous 2 years worth of W2 forms, a mortgage coupon or copy of your monthly mortgage statement, your homeowners insurance policy information, the mortgage note on your current mortgage, your drivers license and social security card. Having these items handy will help speed up the loan approval process.
Remember those pesky closing costs when you first bought your house? Well there back in force when you apply for a home equity loan. They include but are not limited to the following: Up-front charges, such as one or more points (one point equals 1 percent of the credit limit), application fees, appraisal fees and closing costs, including fees for attorneys, title search, and mortgage preparation and filing; property and title insurance; and taxes.
Once recommendation before applying for a loan would be to have a plan in place describing how you intend to pay the loan back. Some plans set minimum payments that cover a portion of the principal plus accrued interest. Other plans may allow payment of interest alone during the life of the plan, which means that you pay nothing toward the principal. If you borrow $10,000, you will owe that amount when the plan ends. You?ll need to be aware of the possibility of a balloon payment. This means whatever your payment arrangements during the life of the plan--whether you pay some, a little, or none of the principal amount of the loan--when the plan ends you may have to pay the entire balance owed, all at once. Failure to complete the loan arrangement by making the balloon payment could result in the forfeiture of your house.
Finally the federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. You usually get these disclosures when you receive an application form, and you will get additional disclosures before the plan is opened.
These simple guidelines were meant to provide you some additional information with the hopes of making you more comfortable and aware of the issues involved when applying for a home equity loan.
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